12 “Hidden” Real Estate Expenses That Blindside Investors

By updated Landlording and Rental Properties

If you are like many people, you may be investing in a buy and hold rental that you can use for passive income in your later years — or even in your earlier years. You look at the monthly mortgage payments, look at the common expenses, and decide it is a “go.” But did you remember to include these hidden expenses before you started spending all that extra money you will have?

There are the common expenses that most people know about and can plan for… and there are expenses that you will have that will reduce your cash flow significantly. If all you have is the rental income — and no “real” job — you could be a former landlord soon if you do not take them into account.

I am not listing property taxes, property insurance, utilities (water, gas electric), HOA dues, snow removal, lawn care, etc. Those are generally obvious and often stated on some cap rate statement (that generally shows a higher cap rate than actual).

The Big 3 “Hidden” Expenses

refinance

Maintenance Expenses

The doomed landlord (or real estate agent) puts a number like $600 a year for maintenance on their cash flow statement for a rental that is renting for $1,000 a month. You can believe that number, or you can be assured that maintenance will run at least 10% of the rents. In older buildings, or a building where the owner has only spent $600 a year, it may run as high as 20% until you get the

Management Expenses

A typical property manager will charge between 8% and 10% of rents to manage a property. In a larger multifamily apartment situation, it may be as low as 4%. All properties MUST be managed, whether by yourself or others. If you think you will manage your own property for free, please contact me directly, as I have many places that you can also manage for free. You must be compensated for your risk and your time. Always assume a number of 10% for a single family home.

Vacancy Expense

Everyone will have a vacancy at some point. If you have a single family home, you may be 100% full — or 100% vacant. I use a number like 5% to account for vacancy. It will cover periods between renters. If you are only vacant for two or three months, just once every five years, you will have used up this expense allocation. Use 5% unless you know it will be more. Never use less.

9 Other Hidden Expenses That You Might Forget

There are also some less common expenses that you may not factor into the cost of a Rental Profit and Loss Statement, but that are most definitely part of the business of real estate, even in a one-unit rental. If you only have $100 a month in cash flow, you will quickly eat that up. I am not going to talk about tax deductions, only the actual expenses. A tax deduction doesn’t help much when you have a negative cash flow and are losing money.

All these expenses are real and must be paid.

Permits and Fees

Many cities are jumping on the rental license bandwagon. It’s a quick way for them to get an extra $50+ — and often more. In some of my rentals, the license is $50 a year, and they require an inspection every three years.  That means over $100 a year to get a rental license. In Minneapolis, MN, it costs $7,000 a year for a vacant building permit, so if you bought a rehab there, it could get very expensive.

Tenant Screening Charges

If you are procuring tenants, you better be factoring in the cost of screening them. With a typical charge being $40 for each adult, each rental turn could be an extra $80+. Some landlords, such as me, pass these charges on to the incoming tenant. But sometimes I waive the fee as an incentive to get a tenant.

If you are using a property manager, plan on giving up a month’s worth of rent (or your first born) to them when the tenant moves in. And a bunch more along the way…

Advertising

Many forms of advertising are free, but you may want to put an ad in a paid format, especially when times are slow. If you have multifamily properties and generally always have something vacant or coming vacant, you will likely have a full-time ad generating prospects.

Evictions

You will never expect that eviction expenses are to be included in any pro-forma statement when you are buying a property. If you do not screen well or neglect to put aside some money to evict, you will be a former landlord very soon. The cost of a bad tenant or an eviction can wipe out several years of profits.

If you are buying a property with tenants included, know that one or more of these tenants might be your first time experiencing the cost of an eviction. Assume that it takes at least five months’ worth of rent to cover the cost of an eviction, factoring in the extra legal expenses, repairs, vacancy, lost rent and advertising. Your headaches are free.

Be sure to have the capital necessary to do what it takes to recover from a bad tenant.

Mileage

You will likely be driving to and from your property. You will be driving to and from the home improvement store. You will be driving to show properties, sign leases, pick up keys, clean common areas, empty coin-op laundry machines, and answer maintenance calls. I drive quite a few miles, making multiple trips, every month. This is another expense that will eat into your $100 a month cash flow. Never underestimate the ability for this expense to add up quickly.

Tools

If you are planning on doing your own maintenance, you better have some decent tools. Any job is easier with solid, quality tools that are meant for the task. A simple thing, like a GFI tester, will be able to test an outlet in seconds. A multi-meter will take longer to do the same task. Without the right tools, your first maintenance job on your property will cost a lot more than just the $5 part.

Banking Charges

Banks like to charge fees to businesses. They give away the farm to individuals, but they like to gouge businesses. While a bank charge might not break your budget, it is an expense that needs to be paid. Account fees, check printing fees, bounced check fees, and cash deposit fees are all ways to reduce your profits. My account is free, but not all banks offer free accounts.

Office Expenses

When you have a rental, you need a solid computer to run your company. You will also need a decent printer.  You will need to print leases, notices, and all sorts of letters. I use a Xerox Phaser 6280 color laser printer, and when cartridges need to be replaced, it is expensive. You will have to buy paper, envelopes, labels and stamps. You may need a cell phone, a scanner, a file cabinet and software such as Microsoft Office with Word and Excel, Quicken, and TurboTax; all of these are my favorites.

At some point, you might need to incorporate. All my rentals are in their own LLCs. You may need an accountant for tax advice or tax preparation. Each LLC will need its own set up and tax forms.

Insurance

You know about property insurance, but what about liability insurance for your business? If you create a property management company to run your rentals and provide an extra layer of protection for your assets, a business liability insurance policy might be a great investment. Another insurance policy you might want is a business umbrella policy.

Conclusion

If you are basing your financial independence on a few rentals that bring in $100 a month each, unless you have counted on these potential extra expenses, you must be prepared to work just a bit longer in your pursuits of leaving your full time job. These costs are all part of doing business, and if you only have $100 of cash flow, they will eat into your profits quickly.

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10 Money-Saving Tricks Furniture Stores Don’t Want You to Know

By | Jan 17, 2017

furniture-shopping-628x354If you’re anything like us, you probably have a love-hate relationship with furniture shopping. You’re besotted while browsing catalogs, admiring gorgeous pieces, and imagining them in your home. But then reality strikes: You have to actually go to the store. Try out styles you like. Discover that you don’t actually like them at all. Try out more.

Suddenly, you hate furniture shopping. And the worst part is yet to come: At some point, you’ve still got to pay for it all.

We all know that furniture doesn’t come cheap. But here’s the good news: You don’t have to spend top dollar on a new couch or dining table. There are sneaky ways to find bargains that furniture stores don’t want you to know.

But we know, and we’re going to share them with you! Here are some hacks and tips that will help you buy new furniture for less dough.

1. Call ahead to stores

Bargains abound in furniture stores if you spend time comparing prices and calling ahead to stores to ask for the best price.

When Checkbook, a consumer group, sent secret shoppers to furniture stores, it found that the same credenza ranged from $1,500 to $2,800 depending on the store. And that wasn’t a one-off.

“We see price differences like this for most things we shop for,” says Kevin Brasler, executive editor of Checkbook.

Sure, you can go store to store to comparison shop. But making a few phone calls beforehand will save you loads of time and energy.

2. Walk a little farther

Walk to corners and all the way to the back of stores. That’s where floor models, scratched tables, and sofas with tiny imperfections hide in plain sight—you know, those items that come with deeply discounted price tags. Take advantage.

3. Cash in on register discounts

Even if a sofa is on sale, you might be able to knock down the price even more at the cash register. Some stores display their bottom-line prices on the register-computer, so cashiers know how low they can go. If you ask for the last, best price, the cashier might be able to give it to you.

4. Buy returned furniture

Sometimes furniture doesn’t find a forever home the first time it’s sold. But one buyer’s castoff can be another’s bargain. When shopping in stores, ask salespeople if any returns are available at discount.

5. Brush up on your bargaining skills

You know you can negotiate the price of a house or car, but did you know you can bargain for furniture?

We know—bargaining can be stressful. But if you can muster the energy to flex your negotiating chops, it can pay off. A 2013 Consumer Reports survey found that 87% of shoppers who haggled were rewarded at least once. Successful furniture hagglers saved $300 on average, Consumer Reports says.

Some store salespeople and, of course, managers have the discretion to reduce prices even below the stated discount. They can dig up a coupon you didn’t bring. (A cashier once went through trash to find me an extra 10%-off coupon that another customer already used.) They can discount or remove delivery charges, especially if you buy more than one item. But you have to ask. If you don’t ask, you don’t get.

If you’d rather stick needles in your eyes than bargain in person, send an email or make a call requesting the lowest price available, Brasler says.

Also, don’t forget to haggle over delivery fees—money is money, and a dollar saved on delivery is a dollar saved on your sofa purchase.

6. Re-evaluate the extended warranty

For high-priced items, extended warranties can be a good idea. These are warranties that cover repairs that aren’t covered by the manufacturer’s warranty, or will extend coverage after the manufacturer’s warranty expires.

But if you’re not careful, they can also be a real black hole for your wallet. Consumer experts say extended warranties often cost more than they’re worth—in other words, you’ll spend less on a potential repair than you will shelling out for the warranty in the first place. We won’t tell you to skip it, but you should crunch the numbers and proceed with caution.

7. Use coupons

Many post offices offer a moving kit loaded with coupons when you fill out a change-of-address form. And typically some of those coupons will be for deals and discounts at furniture and home improvement stores Not moving? Muster the guts to ask your post office for a moving kit anyway.

Some Realtors use such coupons, too, as a marketing tool and perk. Ask for them. And while you’re at it, ask your preferred retailers if they offer some of their own. If so, the discounts could be substantial.

8. Bite the bullet and ask for a senior discount

Some furniture-selling department stores specifically offer the over-55 crowd large and small discounts. For example, Bon-Ton, which has stores in 23 states, runs a Senior Day once a month in many locations. Seniors get a 10% to 20% discount depending on how they pay. Be sure to call the store before showing up and demanding a discount. Self-conscious about asking for the senior discount? Deal with reality. Your bank account will thank you.

9. Shop estate sales

Most of my living room is filled with furniture I bought at estate sales for hundreds of dollars—rather than the thousands I could’ve spent in store. Most gently used estate furniture is priced at 30% to 50% below what you’d pay new, according to Blue Moon Estate Sales, which has 14 locations along the East Coast.

To make the most of estate sales:

  • Arrive early
  • Know what you’re looking for
  • Select older furniture that’s built to last
  • Take a chance and wait until Sunday, the last day of the sale when you can get the best bargains if your treasure is still there. The people running the sale often would rather take a little money than have to pack it up and ship it to the dump, or donate it to a charity.

10. Recycle, reuse

The last thing stores want is for you to upcycle your existing household items. But you can sand and paint an old door, and use it for a table or desk. Remove the drawers from an old dresser, and make it into a new bookcase or bench. The trick is to look at tired items with fresh eyes to put money back into your pocket.

Lisa Kaplan Gordon is an award-winning freelancer who’s written about real estate and home improvement for realtor.com, Yahoo, AOL, and many others.
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Walk for the Cure 2016

Thanks to all of our agents and their friends and family who joined us this weekends at Tempe Beach Park for the Walk for a Cure!

walk-for-a-cure-facebook-az

We had an amazing showing at this years “Walk for the Cure”! People brought their friends, family, children and pets dressed to the hilt to support the cause.

What an amazing time. We hope to continue to see even more people attending next year!

 

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BUYING OR RENTING It’s not just about the money.

Should you be thinking about buying a home over Renting?

Buying or Renting your home

With rents are increasing and predicted to keep increasing into 2017 there is a lot of talk about why it can be a better idea to buy a home instead of rent.

But it’s not just about the money when deciding to buy over rent. When you buy, you gain more flexibility with what you can do to your own property. Paint the wall, make improvements and additions all of these option open up without the added expanse of having to change them back when you end your lease.

When you buy you get control of how long you want to live in your home. You don’t have to worry about resigning leases, or rent increases. You also don’t have to worry about added fees for furry additions to your life!

When you rent a home no matter what happens with the value of that home you will never gain equity in it. You also don’t get to enjoy any of the tax advantages the come with home ownership.

If you are interested in finding out more of the benefits to home ownership contact one of our REALTORS® for a free consultation to see what your options are. They might be more than you think.

Click here to find a local REALTOR®

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September Luxury Featured Properties

luxury-blog-headerWelcome to our collection of Luxury Homes. View multiple photos and more information just by clicking on the photo. Enjoy!

Paradise Valley Charmer!

Paradise Valley ~ $1,100,000
MLS# 5453738
Lynn Mack 480.313.6656
www.LynnMackProperties.com


Troon Ridge Estates IV

North Scottsdale ~ $1,088,000
MLS# 5419429
Teresa R Fahl  480.620.5738
www.TNTFineProperties.com


Magnificent Mummy Mountain Views

Paradise Valley ~ $985,000
MLS# 5423368
Dee Dee Nadler  602.686.6996
www.DeeDeesFineHomes.com


Tempe Executive Living at its Finest

Tempe ~ $949,000
MLS# 5421587
Nicole Mueller 623.764.5313
www.nicolesellsarizona.com


Desert Fairways 13

Scottsdale ~ $950,000
MLS# 5392114
Colleen Seymour 480.518.0826
www.ColleenSeymour.com

 


Disclaimer

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September’s Featured Arizona Luxury Estates

luxury-blog-headerWelcome to our collection of Luxury Homes. View multiple photos and more information just by clicking on the photo. Enjoy!

Timeless European Elegance in Paradise Valley

Paradise Valley ~ $7,195,000
MLS# 5403243 

Eric Heil 602.370.6456
www.HeilHayesGroup.com


Dramatic Sunset Views in Boulder Crest

Scottsdale ~ $1,295,000
MLS# 5080684

Chris Fretland, CRS, MRE, GRI, SFR  480.772.2549
www.ChrisFretland.com


Wonderful Home in Camelback Corridor

Phoenix ~ $859,000
MLS# 5399478
Eric Mininberg  602.757.6249
www.EricMininberg.BHHSAZ.com


Custom Elegance in the Heart of Carefree

Carefree ~ $849,900
MLS# 5387747
Michelle Miller  480.466.2984
MillerTeamSellsAZHomes.com


Million Dollar Views!

Phoenix ~ $645,000
MLS# 5417765
Eric Mininberg  602.757.6249
www.EricMininberg.BHHSAZ.com

 


Disclaimer

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It’s Time to Move UP

With the market’s dynamic swings you might not realize what a historically good time it is to buy a home or upgrade to a larger home.

Its Time to Move Up Graphic- Scottsdale

If you live in a home that was purchased in 2006, you can move up with one more bedroom and 1196 more sq.ft. and potentially pay $368 less per month than you are paying for your current smaller home.

Click here to find a Real Estate agent and get a free consultation on the amount of home you can get and what is available in your dream community.

Posted in BHHS Arizona Properties Market Report, BHHS Arizona Properties Real Estate News, BHHS Arizona Properties Real Estate Tips, Uncategorized | Tagged , | Leave a comment

Renters share their perspectives on home buying

Renters Respond With Their Concerns and Thoughts on The Market

Real Estate Market Consumer sentiment survey - Renters

Berkshire Hathaway HomeServices’ Homeowner Q4 2016 Sentiment Survey also asked renters about their perspectives on homeownership. Many said they’ve been renting homes for longer periods than originally planned.

Those renting for a year to three years said their largest challenge is saving money for a down payment. Prospective homeowners renting from three to five years said their primary hurdles include finding a suitable home, trying to save money and getting a good interest rate on a loan. Those renting for six years or more expressed more concern about the U.S. economy.

Besides saving for a down payment, 37% of millennial renters indicated they are interested in buying only when they’re ready to afford their dream home, signaling that they find the concept of a “starter home” less desirable than previous generations.

Renters who said they could not buy a home listed poor credit scores and strict lender guidelines as their principle hurdles.

Renting stats graph

Berkshire Hathaway HomeServices Consumer Sentiment Survey Methodology

Interviews with 2,521 respondents were conducted online by Edelman Intelligence in June 2016. The respondents captured were either current homeowners (individuals who currently own a home as a primary residence) or prospective homeowners (individuals who do not currently own a home and are likely to buy a home as their primary residence in the next six months). The margin of error is +/-2.2% for current homeowners and +/- 4.4% for prospective homeowners.

ABOUT BERKSHIRE HATHAWAY HOMESERVICES ARIZONA PROPERTIES

Berkshire Hathaway HomeServices Arizona Properties is a part of Americana Holdings, which also includes Berkshire Hathaway HomeServices California Properties and Berkshire Hathaway HomeServices Nevada Properties. The firms are leaders in their respective markets with 25 offices and 2,200 agents, comprising the largest independently owned Berkshire Hathaway HomeServices franchise in the world. Combined, the companies sold $3.1 billion in real estate in 2015.

In 2014, Berkshire Hathaway HomeServices was named “Real Estate Agency Brand of the Year” by consumers in the 26th annual Harris Poll EquiTrend® study of the largest real estate networks. Berkshire Hathaway HomeServices has 54,000 agents in 1,600 offices around the world. For more information, visit www.bhhsaz.com or call 480-505-6300.

 

About Berkshire Hathaway HomeServices and HSF Affiliates LLC

Berkshire Hathaway HomeServices, based in Irvine, CA, is a real estate brokerage network built for a new era in residential real estate. The network, among the few organizations entrusted to use the world-renowned Berkshire Hathaway name, brings to the real estate market a definitive mark of trust, integrity, stability and longevity. Visit www.berkshirehathawayhs.com.

Irvine, CA-based HSF Affiliates LLC operates Berkshire Hathaway HomeServices, Prudential Real Estate and Real Living Real Estate franchise networks. The company is a joint venture of which HomeServices of America, Inc., the nation’s second-largest, full-service residential brokerage firm, is a majority owner. HomeServices of America is an affiliate of world-renowned Berkshire Hathaway Inc.

Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, and are used under license with no other affiliation with Prudential.

Media Contacts:

Sarah Thornton

(702) 796-7777

sarah@sarahthorntonpr.com

 

Kevin Ostler
(949) 794-7980

kevinostler@hsfranchise.com

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Consumers’ Perception of U.S. Housing Gains Ground

Boomers Make Noise While Millennials Exercise Patience in Quest for Homes

Homeowner survey Boomers - Real Estate Market

[Scottsdale, AZ] (August, 24, 2016) — Berkshire Hathaway HomeServices, part of the HSF Affiliates LLC family of real estate brokerage franchise networks, and Berkshire Hathaway HomeServices Arizona Properties today released results of its latest Homeowner Sentiment Survey indicating that current and prospective homeowners remain optimistic about the current state of the U.S. real estate market. Respondents cite higher home values, increasing housing inventory and low interest rates as the main reasons for their optimism.

The survey showed that 66% of existing homeowners view the U.S. real estate market favorably, representing a 5-percentage point jump since spring to the highest level in more than a year. Favorability also grew most among baby boomers, who are making noise with a newly favorable attitude toward the housing market. To date, boomers have been the most pessimistic group tracked in the ongoing survey but the latest results reveal a full 60% of boomers view the housing market favorably, a 6-point increase since last spring.

“We find this data particularly interesting in light of the housing-inventory shortage seen in many markets,” said Gino Blefari, CEO of Berkshire Hathaway HomeServices. “As homeowners feel increasingly confident about the outlook of housing and their homeownership investments, they are more likely to consider a move for themselves – up, down or laterally to another market. Perhaps this is a signal that more existing homes may gradually come to market freeing up more options for first-time and move-up buyers.”

Millennials Are Most Optimistic

Among all respondents, millennials are most optimistic about the real estate market and are the most satisfied with the U.S. economy. In fact, 76% of respondents ages 18 to 34 view housing favorably, up a point from last spring and a full 17 percentage points from November. A large majority of millennials (85%) also believe that owning a home is an important part of the “American Dream,” a sentiment shared with older generations.

Mortgage rates remain low but how low is up to interpretation. Just 13% of millennial respondents described loan rates as “low” while 53% categorized them as “average.” Additionally, millennials indicated that their biggest challenge in purchasing a home is securing a low mortgage rate. Gen-Xers said their largest barrier to homeownership is saving money for the purchase, while boomers – in concert with their growing confidence – said their biggest challenge is “finding a home that suits their family’s wants and needs.”

The possibility of rising mortgage rates remains a concern among all demographic groups surveyed. Not surprisingly, 81% of prospective homebuyers expressed concern about rate increases. “Mortgage rates have been low for so long it’s only reasonable for rates to rise a little at some point down the road,” said Stephen Phillips, president of Berkshire Hathaway HomeServices. “If and when rates do rise, it’s also reasonable to expect only a gradual increase over time – no rate shock.”

Q4 survey - feelings on RE graph

 

Berkshire Hathaway HomeServices Consumer Sentiment Survey Methodology

Interviews with 2,521 respondents were conducted online by Edelman Intelligence in June 2016. The respondents captured were either current homeowners (individuals who currently own a home as a primary residence) or prospective homeowners (individuals who do not currently own a home and are likely to buy a home as their primary residence in the next six months). The margin of error is +/-2.2% for current homeowners and +/- 4.4% for prospective homeowners.

ABOUT BERKSHIRE HATHAWAY HOMESERVICES ARIZONA PROPERTIES

Berkshire Hathaway HomeServices Arizona Properties is a part of Americana Holdings, which also includes Berkshire Hathaway HomeServices California Properties and Berkshire Hathaway HomeServices Nevada Properties. The firms are leaders in their respective markets with 25 offices and 2,200 agents, comprising the largest independently owned Berkshire Hathaway HomeServices franchise in the world. Combined, the companies sold $3.1 billion in real estate in 2015.

In 2014, Berkshire Hathaway HomeServices was named “Real Estate Agency Brand of the Year” by consumers in the 26th annual Harris Poll EquiTrend® study of the largest real estate networks. Berkshire Hathaway HomeServices has 54,000 agents in 1,600 offices around the world. For more information, visit www.bhhsaz.com or call 480-505-6300.

 

About Berkshire Hathaway HomeServices and HSF Affiliates LLC

Berkshire Hathaway HomeServices, based in Irvine, CA, is a real estate brokerage network built for a new era in residential real estate. The network, among the few organizations entrusted to use the world-renowned Berkshire Hathaway name, brings to the real estate market a definitive mark of trust, integrity, stability and longevity. Visit www.berkshirehathawayhs.com.

Irvine, CA-based HSF Affiliates LLC operates Berkshire Hathaway HomeServices, Prudential Real Estate and Real Living Real Estate franchise networks. The company is a joint venture of which HomeServices of America, Inc., the nation’s second-largest, full-service residential brokerage firm, is a majority owner. HomeServices of America is an affiliate of world-renowned Berkshire Hathaway Inc.

Prudential, the Prudential logo and the Rock symbol are service marks of Prudential Financial, Inc. and its related entities, and are used under license with no other affiliation with Prudential.

Media Contacts:

Sarah Thornton

(702) 796-7777

sarah@sarahthorntonpr.com

 

Kevin Ostler
(949) 794-7980

kevinostler@hsfranchise.com

Posted in BHHS Arizona Properties Market Report, BHHS Arizona Properties News, BHHS Arizona Properties Real Estate News | Tagged | Leave a comment

Buying Vs Renting – Rental Rates are Increase

Buying Vs Renting – Price Increase

Rent increase Graphic 2016 AZ

Have you taken a look at the Rental trends in your community? We are sure you noticed the rent hike the last time you went in to renew your lease. Rental costs are skyrocketing and the costs are likely to only go up in 2017.

More than 85 percent of the nation’s markets have rents that exceed 30 percent of the income of renting households.

With rents accelerating at a more rapid pace than home prices it is definitely worth your time to set us a consultation with a local REALTOR® and see how much home you can buy for what you are currently paying in rent.

Click here to find a Real Estate agent and get a free consultation.

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